Abbott lashes out as another report backs carbon tax

Lenore Taylor

AUSTRALIA'S economists are wrong to believe a carbon price is the best way to reduce greenhouse has emissions, the Opposition Leader, Tony Abbott, said yesterday as another expert report concluded a carbon price would be the most efficient policy.

Speaking at the Melbourne Institute conference, Mr Abbott said economists who thought a carbon price was more efficient should ''think again''.

Opposition leader Tony Abbott believes a carbon tax is not the best way to reduce greenhouse emissions. Photo: Ben Rushton

''It may well be … that most Australian economists think that a carbon price or emissions trading scheme is the way to go,'' he said. ''Maybe that's a comment on the quality of our economists rather than on the merits of the argument.''

A new analysis of the Gillard government's carbon price framework and the Coalition's ''Direct Action'' policy commissioned by the Australian Industry Group from Ernst and Young has again found ''carbon pricing, including through the imposition of a carbon tax, is the most effective way of achieving least-cost abatement, particularly in the long term''.

But the report says because the planned carbon price is wider in scope than moves in other countries, the government will need to compensate trade-exposed industries.

While it supported a carbon price in theory, the AI Group said that its backing would depend on the extent of compensation offered.

Advertisement

Ernst and Young said Mr Abbott's plan ''would create no immediate risks to competitiveness'' but was unlikely to reduce emissions at the least cost and ran the risk it would blow the Coalition's allocated budget. The AI Group said it was worried Mr Abbott's policies would create bigger uncertainties than the government's because it would not prompt the changes industry needed to make.

Labor, the Greens and the crossbench independents have all but finalised a carbon tax deal, which the Herald revealed this week would see a definite switch from a carbon tax to an emissions trading scheme in 2015.

The deal is understood to include a multibillion-dollar package to pay for the earlier than expected closure of one or two brown coal generators as well as compensation for other generators, free permits for trade-exposed industries and special compensation for manufacturers and coalminers.

But the Greens have also successfully argued for another multibillion-dollar fund to pay for large-scale renewable energy projects and secured restrictions on the extent business can purchase emission reductions offshore once the carbon tax turns into a trading scheme.

A director and economist of the Grattan Institute, Saul Eslake, said Mr Abbott was attacking economists because he was frustrated ''he can't find a single economist in Australia who supports his policy''.